A slight increase in trading volume is one of the key components of a healthy market outlook for a digital asset. This indicates both ro...
A slight increase in trading volume is one of the key components of a healthy market outlook for a digital asset. This indicates both robust liquidity and an increase in other traders’ enthusiasm for the token. The relationship between asset price and trading volume is nuanced: spikes in volume often follow strong rallies as more traders jump on the bandwagon in hopes of a trip to the moon .
Yet, in some cases, it is the increase in trading volume that leads to price appreciation. In such a scenario, being alerted to abnormal trading activity around a token can help crypto investors spot early signs of an impending rally. Whether spikes in trading volume precede or follow price action, assets that exhibit unusual behavior on this key metric merit further investigation.
The five assets featured below showed the largest week-over-week increases in trading volume last week and were featured in the Unusual Trading Volume section of Cointelegraph Markets Pro dashboard. In three out of five cases, abnormal increases in trading volume foreshadowed significant price increases.
FRONT: Explosion in trading volume following a stock market listing
FRONT, a token representing DeFi aggregator Frontier, topped last week’s trading volume engine chart with a 3041% increase following his registration on the Korean crypto exchange Bithumb. As the chart shows, the January 26 listing announcement initially triggered a price surge as the coin’s value nearly doubled from $0.41 to $0.78 in less than 6 time. FRONT’s trading volume closely tracked price momentum, peaking the day after the announcement.
QKC: A minor price pump anticipates a price spike
QuarkChain (QKC) saw two dramatic increases in trading volume last week, with the largest (+2862%) coming last and after the coin’s weekly high. In a curious plot twist, there was also another rather short-lived spike in trading volume that occurred on January 25 and preceded the price rise by around 6 p.m.
WAVES: price wave first, trading volume wave second
At the peak of its trading volume momentum on January 27, WAVES saw an 860% increase from the previous week. The volume pump followed a strong price increase as the token surged from $8.39 to $11.38 in about 5 hours. Trader activity remained elevated even as the price began to correct.
LOOM: Short-term trading volume pump anticipates price spike
Loom Network (LOOM) trading volume against the price chart resembles QKC above: a sudden, short spike in trading volume occurring several hours before the weekly price peak. What caused LOOM’s trading volume to explode on January 25 from around $5 million to over $34 million (a 520% increase from the previous week) is anyone’s guess. What is certain is that the next day, the price of LOOM rose by 14%, reaching the weekly high at $0.062.
OXY: Price and trading volume increase together
In the case of Oxygen (OXY), beginning on the afternoon of January 24, the trade price and volume lines embarked on bullish trajectories, rising alongside each other. A peak trading volume of around $3.8 million, recorded on January 26, marked a 421% increase week over week. A weekly price spike near $0.49 followed in 12 hours.
Complete intelligence of cryptographic data
In addition to the outlier raw data present in a dedicated section of the CT Markets Pro website, trading volume is also one of the key ingredients of the VORTECS™ score, an algorithmic indicator comparing historical and current market conditions around assets. numbers to identify historically bullish, bearish or neutral.
Any single metric that shapes an asset’s market outlook may be uninformative on its own, but becomes much more useful when contextualized within a host of other variables that the VORTECS™ algorithm takes into account, such as price movement, social sentiment and tweet volume.
Cointelegraph is a publisher of financial information, not an investment adviser. We do not provide personalized or individualized investment advice. Cryptocurrencies are volatile investments and carry significant risks, including the risk of permanent and total loss. Past performance does not represent future results. Figures and graphs are correct at the time of writing or as otherwise specified. Live tested strategies are not recommendations. Consult your financial advisor before making any financial decisions.
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